Brazil Inflation Nears Target Ceiling as Real Rallies and Rate‑Cut Bets Reprice

Overview

• Official data show the IPCA rose 0.33% in January and 4.44% over 12 months, with gasoline adding 0.10 pp to the index as cheaper electricity subtracted 0.11 pp.
• The 12‑month rate sits within the 3% target band’s 4.5% ceiling, drawing attention to the mix of fuel pressures and contained food and housing costs.
• Core and services measures came in hotter than expected, and BCB president Gabriel Galípolo repeated that policy is in a phase of “calibragem,” as markets weigh a 0.25–0.50 pp Selic cut in March with pricing still leaning to 0.50 pp.
• Traders pared aggressive fixed‑income positions after the report, lifting short‑ and mid‑tenor DI rates, while the real held firm near R$5.18 and the Ibovespa jumped 1.97% to a fresh record.
• Brazil’s Treasury raised US$4.5 billion in external bonds on strong US$12 billion demand at yields below guidance, supported by global flows that include reports of Chinese regulators urging banks to trim US Treasury exposure.